Basics
The Impact of Unconditional Cash Transfers on Consumption and Household Balance Sheets: Experimental Evidence from Two US States
Alexander Bartik et al.
NBER Working Paper, August 2024
Abstract:
We provide new evidence on the causal effect of unearned income on consumption, balance sheets, and financial outcomes by exploiting an experiment that randomly assigned 1000 individuals to receive $1000 per month and 2000 individuals to receive $50 per month for three years. The transfer increased measured household expenditures by at least $300 per month. The spending impact is positive in most categories, and is largest for housing, food, and car expenses. The treatment increases housing unit and neighborhood mobility. We find noisily estimated modest positive effects on asset values, driven by financial assets, but these gains are offset by higher debt, resulting in a near-zero effect on net worth. The transfer increased self-reported financial health and credit scores but did not affect credit limits, delinquencies, utilization, bankruptcies, or foreclosures. Adjusting for underreporting, we estimate marginal propensities to consume non-durables between 0.44 and 0.55, durables and semi-durables between 0.21 and 0.26, and marginal propensities to de-lever of near zero. These results suggest that large temporary transfers increase short-term consumption and improve financial health but may not cause persistent improvements in the financial position of young, low-income households.
Socializing Policy Feedback: The Long-Term Effects of Adolescent Program Participation on Adult Party Identification
Nathan Micatka & Julianna Pacheco
Political Research Quarterly, forthcoming
Abstract:
Despite the expectation that welfare participation -- because of its direct monetary payments -- fosters strong attachments to the Democratic Party, the evidence to date suggests that welfare is unrelated to party identification. The majority of this research, however, focuses on adults, when partisan development is over. We argue that adolescent welfare participation may serve as a class-based signal that reinforces identification with the Democratic Party. Our inferences are generally consistent with this line of reasoning, but we also find important differences across race and ethnicity. Depending on the model, the likelihood of identifying with the Democratic Party in adulthood for white respondents is anywhere from 9 to 16% points higher for respondents who grew up in families that received welfare compared to those who did not have adolescent welfare participation. Other results, however, suggest a negative association between adolescent welfare use and identification with the Democratic Party for non-Hispanic black respondents. We conclude that despite the fact that adult welfare experiences lead to political disengagement, adolescent program participation can be sites of partisan learning.
Who Are the Hand-to-Mouth?
Mark Aguiar, Mark Bils & Corina Boar
Review of Economic Studies, forthcoming
Abstract:
Many households hold little wealth. In standard precautionary savings models, these households should not only display higher marginal propensities to consume (MPCs) but also higher future consumption growth. In contrast, we see from the Panel Study of Income Dynamics that such “hand-to-mouth” households do not display higher growth in spending. They also exhibit greater volatility of spending and adjust their spending to a greater extent through the number of categories consumed. Consistent with a role for preference heterogeneity, the panel data show that it is persistent differences across households, not current assets, that predict low consumption growth and other spending differences for the hand-to-mouth households. To identify the extent of preference heterogeneity, we consider the model of Kaplan and Violante with both liquid and illiquid assets, but allow heterogeneity in preferences. To match the data, many poor hand-to-mouth must be relatively impatient and have a high inter-temporal elasticity of substitution. The model shows that preferences predominantly explain the higher MPCs for low-asset households. Preference heterogeneity notably increases the spending impact of fiscal transfers, but only if targeted, while reducing that from interest rate cuts.
The Effect of Emergency Financial Assistance on Employment and Earnings
Daniel Hungerman et al.
NBER Working Paper, August 2024
Abstract:
We examine the labor supply effects of short-term income transfers for families experiencing a housing crisis. We link callers of an emergency assistance homelessness prevention hotline to their federal tax records and measure their employment & earnings in years surrounding their calls. Our methodology exploits quasi-random variation in the availability of assistance to compare similar families receiving and not receiving funds. Looking up to four years post-assistance, we find evidence, especially for the lowest earners, of earnings and employment gains, and overall we find no evidence that assistance lowers earnings or employment. Our results indicate that any income effect of temporary transfers for those in crisis is minimal and that these transfers may convey labor market benefits for the poorest of the poor.
Effect of Cash Benefits on Health Care Utilization and Health: A Randomized Study
Sumit Agarwal, Benjamin Lê Cook & Jeffrey Liebman
Journal of the American Medical Association, forthcoming
Design, Setting, and Participants: The City of Chelsea, Massachusetts, a low-income community near Boston, randomly assigned individuals by lottery to receive cash benefits. Participants’ medical records were linked across multiple health systems. Outcomes were assessed during the intervention period from November 24, 2020, to August 31, 2021.
Intervention: Cash benefits via debit card of up to $400 per month for 9 months.
Results: Among 2880 individuals who applied for the lottery, mean age was 45.1 years and 77% were female. The 1746 participants randomized to receive the cash benefits had significantly fewer emergency department visits compared with the control group (217.1 vs 317.5 emergency department visits per 1000 persons; adjusted difference, −87.0 per 1000 persons [95% CI, −160.2 to −13.8]). This included reductions in emergency department visits related to behavioral health (−21.6 visits per 1000 persons [95% CI, −40.2 to −3.1]) and substance use (−12.8 visits per 1000 persons [95% CI, −25.0 to −0.6]) as well as those that resulted in a hospitalization (−27.3 visits per 1000 persons [95% CI, −53.6 to −1.1]). The cash benefit had no statistically significant effect on total outpatient visits (424.3 visits per 1000 persons [95% CI, −118.6 to 967.2]), visits to primary care (−90.4 visits per 1000 persons [95% CI, −308.1 to 127.2]), or outpatient behavioral health (83.5 visits per 1000 persons [95% CI, −182.9 to 349.9]). Outpatient visits to other subspecialties were higher in the cash benefit group compared with the control group (303.1 visits per 1000 persons [95% CI, 32.9 to 573.2]), particularly for individuals without a car. The cash benefit had no statistically significant effect on COVID-19 vaccination, blood pressure, body weight, glycated hemoglobin, or cholesterol level.
Your friends, your credit: Social capital measures derived from social media and the credit market
Jesse Bricker & Geng Li
Economics Letters, September 2024
Abstract:
We document a robust correlation between the Bricker and Li (2017) social trust indicator and the Chetty et al. (2022a) economic connectedness measure. The two indicators predict upward income mobility independently to a comparable extent. The Bricker-Li indicator is defined as the average credit score of a community, and the Chetty et al. measures are based on Facebook befriending data. The consistency and complementarity between these two indicators underscore trust as a crucial ingredient of social capital.
State Partisan Dominance and the Distribution of TANF Funds, 2000–2018
Jonathan Winburn, Robert Brown & Nichole Gligor
State and Local Government Review, forthcoming
Abstract:
In this field note, we examine the changing distribution of TANF spending patterns across the states. Given the important shift from the more restrictive categorical grant of AFDC to the more flexible block grant of TANF, examining patterns of spending across program categories is an important facet for understanding states’ welfare efforts. Overall, there has been a general decrease in the percentage of state TANF spending on cash assistance. Using a new measure of party dominance, we find that Democratic states initially spent a higher share of their TANF funds on cash assistance than Republican states. However, by the 2010s this partisan difference basically disappeared with Democratic states spending patterns matching those of Republican states, focusing less on cash assistance and giving greater priority to areas less reflective of TANF’s principal objectives.
Minimum wages and the uptake of Supplemental Security Income
Krishna Regmi
Labour Economics, October 2024
Abstract:
This study investigates whether the minimum wage affects the uptake of Supplemental Security Income (SSI). To disentangle the effect of the minimum wage from underlying macroeconomic conditions, I use a triple-differences-type model that exploits cross-state and temporal differences in the minimum wage and its differential effects on those individuals with and without a high school diploma. I find that a one percent increase in the minimum wage leads to a 0.33 percent decline in SSI uptake. The effect is concentrated in unmarried individuals, who are more likely to face financial constraints and thus meet income and resource thresholds for collecting SSI.
The Financial Consequences of Legalized Sports Gambling
Brett Hollenbeck, Poet Larsen & Davide Proserpio
University of Southern California Working Paper, July 2024
Abstract:
Following a 2018 ruling of the U.S. Supreme Court, 38 states have legalized sports gambling. We study how this policy has impacted consumer financial health using the state-by-state rollout of legal sports gambling and a large and comprehensive dataset on consumer financial outcomes. Our main finding is that overall, consumers' financial health is modestly deteriorating as the average credit score in states that legalize sports gambling decreases by roughly 0.3%. The decline in credit score is associated with changes in indicators of excessive debt. We find a substantial increase in bankruptcy rates, debt collections, debt consolidation loans, and auto loan delinquencies. We also find that financial institutions respond to the reduced creditworthiness of consumers by restricting access to credit. These results are stronger for states that allow sports gambling online compared to states that restrict access to in-person betting and larger for young men in low-income counties. Together, these results indicate that the ease of access to sports gambling is harming consumer financial health by increasing their level of debt.